Intro to Accounting

Question 1

financial accounting info is used to…

Answer 1

• make investment decisions
• value businesses + predict corporate success and failure

Question 2

management accounting…

Answer 2

provides info internally to managers to help them measure and control processes

Question 3

management accounting assists managers in:

Answer 3

• strategy implementation
• costing of new products + services
• evaluation of the value added by diff areas of the business
• managing performance of different areas of the business

Question 4

auditing and assurance services exist to:

Answer 4

monitor + add credibility to the external reporting disclosures made by companies
(can also add credibility to non-financial info –> sustainability + carbon reporting, diversity + inclusion reporting)

Question 5

skills of an accountant include:

Answer 5

• analytical skills + critical thinking
• oral and written communication
• collaboration with others
• organisation and time management
• management of finances and budgets
• business knowledge and acumen (ability to make good judgement and quick decisions)

Question 6

characteristics of good quality accounting info: relevant

Answer 6

• info is relevant if it influences users’ economic decision-making
• info’s relevance is affected by its nature and materiality

Question 7

characteristics of good quality accounting info: reliable

Answer 7

info is:
- free from material error
- faithfully represented
- substance over form is reflected
- neutral
- prudent
- complete

Question 8

characteristics of good quality accounting info: comparable

Answer 8

financial info must be comparable:
- through time (e.g. to prior periods)
- to other entities (e.g. competitors)

Question 9

characteristics of good quality accounting info: verifiable

Answer 9

• info is verifiable if there is an agreement by independant observers that the info is reliable

Question 10

characteristics of good quality accounting info: understandable

Answer 10

• a reasonable knowledge of financial understanding is assumed of the user
• complex matters however, should not be ommitted

Question 11

characteristics of good quality accounting info: timeliness

Answer 11

• financial statements must be timely
• if published several months after the year-end, is that enough for a user to make decisions?